Ground Breakers: Impatient junta gives Rio 14 days to get its Simandou s..t together
Rio Tinto’s (ASX:RIO) bid to build its share of the mammoth Simandou iron ore deposit could be getting even more complicated after the country’s impatient military junta reportedly gave a 14-day deadline to it and the deposit’s fellow operator SMB-Winning Consortium to form a JV on infrastructure to the mine.
Reuters and Bloomberg say the comments were made by Guinea’s muscled up interim president Colonel Mamady Doumbouya in a meeting on Friday recorded and posted by his office.
Guinea came to an interim agreement in March with Rio and the Chinese-backed Winning Consortium over sharing infrastructure for the mines, operators each of two blocks of the giant Simandou deposit.
Simandou has been described as the ‘Pilbara Killer’ and China’s opportunity to wean itself off its reliance on Australian iron ore over the years.
But estimates of its potential output vary wildly depending on the source, ranging anywhere from 60Mt to 200Mtpa, a mark it will certainly not hit in the near term.
Guinea’s military leadership, which ousted longtime president Alpha Conde in a coup last September, wants the mine operating by 2025.
But many market experts think it will be extremely hard to develop, something highlighted by the fact that Rio, which discovered the ultra-high grade deposit and secured the first exploration licences, has never exited the study phase in more than 25 years since acquiring its interest.
The deposit is ultra high grade, lending its ore well to the green steelmaking technologies expected to grab increasing market share as China’s steel mills face pressure to decarbonise. Rio executive Bold Baatar last year described it as the “Rolls Royce” of the iron ore game.
But it is remote, requiring a multi-billion dollar 670km railway and port development to bring the ore to market.
It appears likely that the Winning Consortium and Rio will share this infrastructure, based on the interim agreement announced a few months ago, but reports today suggest Doumbouya wants something more secure, and quick. He wants the JV signed within 14 days, Reuters reported.
“This situation is not only regrettable, but above all, unacceptable for the state,” he said.
Better, at least.
Whether it’s a dead cat bounce or the sell-off in iron ore has hit a floor remains to be seen.
Dalian iron ore futures started trading down but have slowly moved to break even over the course of the morning session, while Singapore futures have rebounded 3.79% to US$115.05/t.
All were up this morning with heavily sold materials and energy indexes recovering by 1.87% and 3.21%, respectively.
China announced new support for manufacturing businesses affected by its Covid lockdowns, boosting demand for base metals.
“Base metals edged higher, led by gains in copper and aluminium amid hopes that Chinese demand will recover,” ANZ senior economist Adelaide Timbrell said in a note.
“Beijing vowed to provide extraordinary support for manufacturers and measures to boost housing demand as it faces lockdowns to curb COVID-19 outbreaks.
“The focus is likely to settle on mid and downstream manufacturing firms, which would likely lead to a direct improvement in demand for raw materials such as metals.”
Lithium miner Allkem (ASX:AKE), copper producer OZ Minerals (ASX:OZL), rare earths giant Lynas (ASX:LYC) and coal miner Yancoal (ASX:YAL) were all on the leaderboard this morning, with the mid-cap standouts dotted with coal exporters who made back yesterday’s heavy losses.
Yancoal’s revival will be particularly important for minority shareholders who had seen its share price dip below the price of a ‘lowball offer’ from its Hong Kong-listed parent company rejected this month by an independent board committee.